Economic Integration in East Asia
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Economic Integration in East Asia

Perspectives from Spatial and Neoclassical Economics

Edited by Masahisa Fujita, Satoru Kumagai and Koji Nishikimi

Increasing numbers of free trade and economic partnership agreements have been concluded among many countries in East Asia, and economic integration has progressed rapidly on both a de facto and de jure basis. However, as the authors of this book argue, integration may intensify regional inequalities in East Asia and so this process has attracted much attention of late. Will it actually succeed in achieving greater economic growth or will it in fact cause growing regional disparity?
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Chapter 2: Regional Integration in East Asia: Perspectives of Spatial and Neoclassical Economics

Masahisa Fujita and Nobuaki Hamaguchi


Masahisa Fujita and Nobuaki Hamaguchi INTRODUCTION 2.1 Globalization has highlighted the importance of geography. Firms can choose locations more freely and internationally so as to produce and deliver more efficiently, taking into consideration locational advantages in labor cost, infrastructure quality and accessibility to major markets. The reduction of trade costs in the broad sense (Anderson and Wincoop 2004) has allowed firms to supply a much wider area of markets from a smaller number of production locations. This, in turn, has provoked a concern over widening regional income disparities because some regions seem to attract a disproportionately large share of productive employment while others are left with only a small share. In the early 1990s, concern about the future of European integration after the establishment of the European Union (EU) in 1993 encouraged some theorists to develop models of the location of economic activities; this has become known as ‘spatial economics’. A natural question of interest was, ‘Given the regional integration of the EU as a single market, what will be the spatial distribution of economic activities?’ Since then, spatial economics has reached a certain theoretical consolidation, as we can see in Fujita et al. (1999), Baldwin et al. (2003) and Henderson and Thisse (2004). This book examines the future of the economic geography of East Asia, which is also increasing its degree of integration. Casual observation identifies a complex combination of both a dispersion of industries from higher-wage regions to lower-wage ones, and a concentration in larger...

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